WEBVTT 00:00:01.129 --> 00:00:04.690 Most people have their retirements in the stock 00:00:04.690 --> 00:00:09.150 market via 401k, Roth IRA or traditional IRA. 00:00:09.750 --> 00:00:13.550 If you have your money in an investment company, 00:00:13.830 --> 00:00:17.390 a financial advisor like Edward Jones or Raymond 00:00:17.390 --> 00:00:20.690 James or Charles Schwab, you could be losing 00:00:20.690 --> 00:00:23.449 tens of thousands, if not hundreds of thousands 00:00:23.449 --> 00:00:25.910 of dollars over the lifetime of your account, 00:00:26.070 --> 00:00:29.350 which could adversely affect the amount of money 00:00:29.350 --> 00:00:32.490 you have to retire with. And today I'm going 00:00:32.490 --> 00:00:35.350 to talk about why this is and what you can do 00:00:35.350 --> 00:00:38.070 about it. Let's get into it. If we haven't met 00:00:38.070 --> 00:00:40.149 before, my name is Doug Barinas. I'm a licensed 00:00:40.149 --> 00:00:42.310 real estate agent in Washington and Oregon, as 00:00:42.310 --> 00:00:44.850 well as an accredited investor. And today I'm 00:00:44.850 --> 00:00:47.609 going to talk about these asset under management 00:00:47.609 --> 00:01:09.760 fee. So. And I've been a customer of these. So 00:01:09.760 --> 00:01:11.980 I'm going to let you give you the inside scoop 00:01:11.980 --> 00:01:14.180 because at one point I was a customer of Edward 00:01:14.180 --> 00:01:17.200 Jones and I left them several years ago and it's 00:01:17.200 --> 00:01:20.000 been great. I have no regrets about it at all. 00:01:20.319 --> 00:01:24.019 And so here are the fee structures that these 00:01:24.019 --> 00:01:27.359 companies tend to charge. They tend to charge 00:01:27.359 --> 00:01:30.700 fees based on assets under management, which 00:01:30.700 --> 00:01:33.379 is the total amount you have in your account. 00:01:33.560 --> 00:01:37.480 And these fees are typically 1%. of your account 00:01:37.480 --> 00:01:41.140 balance. And so if you have $100 ,000 in your 00:01:41.140 --> 00:01:45.400 account, that's $1 ,000 a year based on my estimates. 00:01:46.079 --> 00:01:50.099 And so you think to yourself, wow, okay, 1%. 00:01:50.099 --> 00:01:56.140 That's not a lot. No problem. But when I pay 00:01:56.140 --> 00:02:00.379 for things, typically, I want there to be a tangible 00:02:00.379 --> 00:02:03.500 reason I'm paying somebody for that service. 00:02:03.760 --> 00:02:07.459 So if I pay a plumber $600, I want to know that 00:02:07.459 --> 00:02:11.960 my pipes are going to be fixed. If I pay someone 00:02:11.960 --> 00:02:16.680 to clean my house or do some other kind of task, 00:02:17.020 --> 00:02:20.539 I know what I'm paying for. I get that service 00:02:20.539 --> 00:02:22.460 and I'm happy to pay for it. Everything's up 00:02:22.460 --> 00:02:25.780 front. But with these firms, you're not getting 00:02:25.780 --> 00:02:27.680 that because they're charging you in a couple 00:02:27.680 --> 00:02:30.340 of different ways. So one is that 1 % that I 00:02:30.340 --> 00:02:32.840 mentioned. And you think to yourself again. 1 00:02:32.840 --> 00:02:35.840 % is not very much. Well, 1 % compounded over 00:02:35.840 --> 00:02:38.460 time can end up being tens of thousands, hundreds 00:02:38.460 --> 00:02:40.680 of thousands of dollars over the lifetime of 00:02:40.680 --> 00:02:43.759 your account. So it's not nothing. You're not 00:02:43.759 --> 00:02:47.500 paying, it sounds small, but in the end, it's 00:02:47.500 --> 00:02:50.300 still a significant amount of money when you 00:02:50.300 --> 00:02:53.960 factor in what that could be doing for your portfolio 00:02:53.960 --> 00:02:57.919 over time compounding at an average of let's 00:02:57.919 --> 00:03:00.979 9%, which is sort of the typical historical stock 00:03:00.979 --> 00:03:05.479 market return. you know, 8 % to 10%. And so again, 00:03:05.580 --> 00:03:08.439 great, what am I getting for 1 %? That is the 00:03:08.439 --> 00:03:10.580 question. Because when you go to these companies, 00:03:10.860 --> 00:03:13.580 they will tell you that their target rate of 00:03:13.580 --> 00:03:17.319 return is 8 % to 10%, which magically corresponds 00:03:17.319 --> 00:03:20.199 to what you would get, the returns you would 00:03:20.199 --> 00:03:24.099 get if you just put your money into an index 00:03:24.099 --> 00:03:27.659 fund that tracks the S &P 500 or the total stock 00:03:27.659 --> 00:03:32.669 market, you would be getting 8 % to 10%. Great. 00:03:33.210 --> 00:03:38.889 So why am I paying you 1 % to do this? Because 00:03:38.889 --> 00:03:43.409 you are not getting asymmetrical returns. You 00:03:43.409 --> 00:03:45.050 are not getting returns that are going to be 00:03:45.050 --> 00:03:48.250 higher than the market average. And they will 00:03:48.250 --> 00:03:50.930 tell you this. If you ask them what the return 00:03:50.930 --> 00:03:53.930 is, they tell you the return. It's what the average 00:03:53.930 --> 00:03:58.719 return of the stock market is. Great. So I'm 00:03:58.719 --> 00:04:01.180 paying for something and I'm not getting anything 00:04:01.180 --> 00:04:04.539 extra. I'm just getting the standard return if 00:04:04.539 --> 00:04:08.939 I just socked it into an ETF. And the whole reasoning 00:04:08.939 --> 00:04:12.719 behind these financial investment firms is they 00:04:12.719 --> 00:04:15.419 make everything look complicated. They make it 00:04:15.419 --> 00:04:18.220 seem complicated and that you can't do it without 00:04:18.220 --> 00:04:20.540 their help. Like you cannot possibly negotiate 00:04:20.540 --> 00:04:22.939 the stock market investing thing because it's 00:04:22.939 --> 00:04:25.259 too complicated. And people go, oh, it's too 00:04:25.259 --> 00:04:27.019 complicated. I can't do it. Here's my money. 00:04:27.550 --> 00:04:30.370 But the truth is, it's not very complicated and 00:04:30.370 --> 00:04:34.069 you can do it yourself and you can get the same 00:04:34.069 --> 00:04:38.569 returns for a fraction of that 1%. But it's not 00:04:38.569 --> 00:04:41.670 only that they charge you 1%. So that's already 00:04:41.670 --> 00:04:45.490 sort of a very, in my mind, sort of unethical 00:04:45.490 --> 00:04:47.430 way to present what they're doing. Like they're 00:04:47.430 --> 00:04:50.269 charging you, they're just charging you for market 00:04:50.269 --> 00:04:51.970 returns that you could get anywhere, but they're 00:04:51.970 --> 00:04:55.189 charging you more money. And then on top of that, 00:04:55.329 --> 00:04:59.089 they are going to they get commissions from certain 00:04:59.089 --> 00:05:02.050 funds that they push, that they recommend and 00:05:02.050 --> 00:05:04.089 that they use. And so when I was with Edward 00:05:04.089 --> 00:05:08.029 Jones, they had me in like 13 different funds, 00:05:08.189 --> 00:05:10.610 all of which were basically with the same company. 00:05:10.730 --> 00:05:13.889 And when I looked at the expense ratios of these, 00:05:14.009 --> 00:05:16.149 so the expense ratios is basically what the fund 00:05:16.149 --> 00:05:19.189 charges you to manage that fund. And so they 00:05:19.189 --> 00:05:25.279 can range anywhere from point zero. 2 % to almost 00:05:25.279 --> 00:05:30.959 2%. And so what these funds were charging me 00:05:30.959 --> 00:05:36.540 on top of that 1 % was outrageous. So I'm talking 00:05:36.540 --> 00:05:38.439 about like, I think the lowest one was like 0 00:05:38.439 --> 00:05:44.860 .65%. So getting close to like... almost 1 % 00:05:44.860 --> 00:05:47.879 fees. And these are actively managed funds. And 00:05:47.879 --> 00:05:50.319 historically, actively managed funds have not 00:05:50.319 --> 00:05:54.740 outperformed passively managed index funds. Historically, 00:05:54.740 --> 00:05:57.180 they have not done as well. So I'm paying them 00:05:57.180 --> 00:06:00.100 again twice because I'm already paying that 1 00:06:00.100 --> 00:06:02.800 % to get market returns. And then I'm getting 00:06:02.800 --> 00:06:05.959 into 13 funds. It doesn't need to be that complicated, 00:06:06.100 --> 00:06:09.240 people. You don't need 13 funds. I have a total 00:06:09.240 --> 00:06:12.379 stock market fund. domestic. So an American total 00:06:12.379 --> 00:06:15.180 stock market fund, a total international stock 00:06:15.180 --> 00:06:17.439 market fund. And then I have a couple, an international 00:06:17.439 --> 00:06:20.480 bond and a domestic bond fund. So really four 00:06:20.480 --> 00:06:25.279 funds is pretty much what you need. You do not 00:06:25.279 --> 00:06:28.480 need 13 funds. So I was being sold. I bought 00:06:28.480 --> 00:06:31.240 13 funds through them. That's where they put 00:06:31.240 --> 00:06:33.740 my money. And then the expense ratios were astronomical, 00:06:33.920 --> 00:06:38.949 like 1 .5%, 0 .65%. So ridiculous. So that's 00:06:38.949 --> 00:06:40.810 also costing me a lot of money. So not only am 00:06:40.810 --> 00:06:44.490 I paying the 1%, I'm paying the exorbitant expense 00:06:44.490 --> 00:06:47.050 ratios, the management fees for all these other 00:06:47.050 --> 00:06:50.209 funds that they're setting me up with. So that's 00:06:50.209 --> 00:06:53.889 another way that they get you. And so, you know, 00:06:53.889 --> 00:06:55.910 and then every year you got to go through these, 00:06:55.949 --> 00:06:58.810 you know, advising that they call you in to go 00:06:58.810 --> 00:07:00.829 over your portfolio and it's a big deal. And 00:07:00.829 --> 00:07:02.550 they pull up all these charts and they tell you 00:07:02.550 --> 00:07:04.269 all, they use all this lingo and you're like, 00:07:04.290 --> 00:07:07.629 Oh, I couldn't possibly do this. I challenge 00:07:07.629 --> 00:07:10.329 you if you use one of these companies like an 00:07:10.329 --> 00:07:13.569 Edward Jones or a Schwab or one of these asset 00:07:13.569 --> 00:07:16.290 under management funds, because when they charge 00:07:16.290 --> 00:07:19.889 you that 1 % and your fund grows, then they're 00:07:19.889 --> 00:07:22.889 making more money. It's 1%. Why are they making 00:07:22.889 --> 00:07:25.689 more money doing the same thing that they did 00:07:25.689 --> 00:07:29.129 when you had 100 ,000 that they do when you have 00:07:29.129 --> 00:07:31.910 a million? There's not really a reason for that 00:07:31.910 --> 00:07:34.310 other than them making some money. Now, a lot 00:07:34.310 --> 00:07:36.389 of people, if you're the kind of person who... 00:07:36.509 --> 00:07:38.149 watches the stock market all the time and like 00:07:38.149 --> 00:07:40.449 hits the panic button and wants to sell everything 00:07:40.449 --> 00:07:43.449 when it goes down a little bit, then maybe you 00:07:43.449 --> 00:07:46.529 do need somebody like Edward Jones to like talk 00:07:46.529 --> 00:07:48.709 you off the ledge. So you're not just panic selling 00:07:48.709 --> 00:07:51.170 everything. I suspect if you're watching this 00:07:51.170 --> 00:07:53.730 video, maybe that's not what you do when the 00:07:53.730 --> 00:07:56.670 stock market goes down. If you feel like so nervous 00:07:56.670 --> 00:07:59.529 and you need somebody to talk to who's like, 00:07:59.649 --> 00:08:02.310 okay, calm down everybody. Because that's kind 00:08:02.310 --> 00:08:04.879 of the emails I would get from them. don't worry, 00:08:05.079 --> 00:08:07.800 the stock market historically does this and it 00:08:07.800 --> 00:08:09.779 goes up, so don't sell everything. And I was 00:08:09.779 --> 00:08:13.300 like, I don't need you to tell me this. And this 00:08:13.300 --> 00:08:15.339 doesn't take a lot of research. People think 00:08:15.339 --> 00:08:18.500 investing is so complicated and really it's not. 00:08:19.540 --> 00:08:22.379 Dollar cost averaging, so consistently contributing 00:08:22.379 --> 00:08:27.160 to a diversified fund that tracks the S &P 500 00:08:27.160 --> 00:08:30.240 or the total stock market. Over time, you're 00:08:30.240 --> 00:08:33.200 going to get those returns. They go down, they 00:08:33.200 --> 00:08:36.440 go up. And over time, that's the return you're 00:08:36.440 --> 00:08:39.279 going to get. I don't need to pay 1%. And I don't 00:08:39.279 --> 00:08:43.139 need you to load my fund up with 13 funds that 00:08:43.139 --> 00:08:46.100 charge me exorbitant expense ratios. That's just 00:08:46.100 --> 00:08:49.279 crazy. And so the solution to this, and there's 00:08:49.279 --> 00:08:51.759 plenty of ways to invest. Most people invest 00:08:51.759 --> 00:08:54.200 in the stock market. So I mean, I think this 00:08:54.200 --> 00:08:56.679 video is for people that aren't professional 00:08:56.679 --> 00:08:59.139 investors. Maybe they have a limited interest 00:08:59.139 --> 00:09:03.009 in investing. You're certainly smart enough to 00:09:03.009 --> 00:09:05.850 realize that you don't need to pay somebody to 00:09:05.850 --> 00:09:09.169 get you market average returns. You don't need 00:09:09.169 --> 00:09:12.149 to get them 1 % on top of these crazy fees. So 00:09:12.149 --> 00:09:13.350 at the end of the day, when I was a customer 00:09:13.350 --> 00:09:16.070 at Edward Jones, I did my research on these fees 00:09:16.070 --> 00:09:18.850 and it just didn't make sense to me. And finally, 00:09:18.889 --> 00:09:20.970 I just called my guy up and was like, I don't 00:09:20.970 --> 00:09:24.950 understand what I'm paying you. Or if you're 00:09:24.950 --> 00:09:28.269 not providing me asymmetrical returns, which 00:09:28.269 --> 00:09:29.950 they're not, they're not guaranteeing you anything 00:09:29.950 --> 00:09:32.409 other than average market returns, then why am 00:09:32.409 --> 00:09:34.490 I paying you? What are you doing for me? It's 00:09:34.490 --> 00:09:36.750 the question I asked. And I couldn't get an answer. 00:09:36.789 --> 00:09:41.409 It was like a blubbering. And it just didn't 00:09:41.409 --> 00:09:43.429 make sense. And I was like, I'm out. Thank you 00:09:43.429 --> 00:09:46.990 for all you've done. I'm going to move my funds 00:09:46.990 --> 00:09:50.519 over to. what I think is a good solution. Again, 00:09:50.639 --> 00:09:53.159 I don't own any, I'm not a financial advisor 00:09:53.159 --> 00:09:55.820 myself, not financial advice, but what I did 00:09:55.820 --> 00:09:58.879 is I moved them over to Vanguard. I already had 00:09:58.879 --> 00:10:00.720 an account there. I like Vanguard. I don't get 00:10:00.720 --> 00:10:03.379 sponsored by them. I think Fidelity has low cost 00:10:03.379 --> 00:10:07.259 funds too. I just use Vanguard. And so I brought 00:10:07.259 --> 00:10:09.580 all my money to Vanguard that I had at Edward 00:10:09.580 --> 00:10:12.960 Jones and I used a robo advisor. So they basically, 00:10:12.980 --> 00:10:16.200 you take a quick survey on what your goals are. 00:10:16.779 --> 00:10:18.639 And you can, you have the option to talk to somebody 00:10:18.639 --> 00:10:21.240 there, or you can just fill out the survey, do 00:10:21.240 --> 00:10:24.039 the robo investing. I think the fee is like 0 00:10:24.039 --> 00:10:29.500 .25 % a year. So considerably less, 75 % less 00:10:29.500 --> 00:10:31.639 expensive than what you're going to get at, you 00:10:31.639 --> 00:10:33.500 know, Edward Jones or Raymond James or one of 00:10:33.500 --> 00:10:35.320 those companies. Because I didn't need somebody 00:10:35.320 --> 00:10:37.200 to call. I didn't need to go into a meeting every 00:10:37.200 --> 00:10:39.639 year with all these graphs and tell me how I'm 00:10:39.639 --> 00:10:41.820 doing. Because like, I basically could just see 00:10:41.820 --> 00:10:43.860 how I'm doing because it was all market returns. 00:10:44.509 --> 00:10:46.370 I didn't need to waste my time with that. I didn't 00:10:46.370 --> 00:10:48.830 need you to talk me off a cliff. I just needed 00:10:48.830 --> 00:10:53.029 a way to automate my investing. It gets rebalanced 00:10:53.029 --> 00:10:57.149 automatically. And again, I'm still planning 00:10:57.149 --> 00:10:59.690 on checking in with a financial advisor. But 00:10:59.690 --> 00:11:01.289 if you're going to do that, I recommend a fee 00:11:01.289 --> 00:11:04.549 -only financial advisor. They don't base their 00:11:04.549 --> 00:11:06.690 fees on your assets under management. They charge 00:11:06.690 --> 00:11:09.370 you either a flat fee or an hourly fee. And so 00:11:09.370 --> 00:11:11.470 they're able to take a look at your portfolio, 00:11:11.889 --> 00:11:14.649 give you some advice. tell you what you might 00:11:14.649 --> 00:11:20.129 need to do. But really, it's a lot less complicated 00:11:20.129 --> 00:11:24.110 than people make it out to be. It can get complicated. 00:11:24.950 --> 00:11:28.070 But for what Edward Jones and similar companies 00:11:28.070 --> 00:11:31.730 were doing, it certainly wasn't worth the fees 00:11:31.730 --> 00:11:34.230 for what they were doing. Not at all. I've been 00:11:34.230 --> 00:11:36.769 super happy using the robo -investing strategy. 00:11:37.679 --> 00:11:39.799 where I'm just sending them money every month. 00:11:39.860 --> 00:11:42.840 It gets put into the four funds. It gets rebalanced. 00:11:43.039 --> 00:11:46.100 No problem. No worries. And then I bring on the 00:11:46.100 --> 00:11:50.299 help of a fee only. So they're, again, not charging 00:11:50.299 --> 00:11:52.600 me based on how much money I have. I'm just paying 00:11:52.600 --> 00:11:54.740 them a fee. They're fiduciaries. They have no 00:11:54.740 --> 00:11:56.919 skin in the game. I'm just paying them the money. 00:11:57.019 --> 00:11:59.120 They're giving me the advice. They're certified 00:11:59.120 --> 00:12:03.740 financial planners as well. they have fiduciary 00:12:03.740 --> 00:12:05.500 rules. Like the people at Edward Jones will tell 00:12:05.500 --> 00:12:07.259 you, I'm a fiduciary. I have your best interests 00:12:07.259 --> 00:12:09.139 in mind. But the definition of that is pretty 00:12:09.139 --> 00:12:12.019 vague. And there's ways to get around it because 00:12:12.019 --> 00:12:14.960 what they were doing, it was not fiduciary. It 00:12:14.960 --> 00:12:18.360 was, I repeat, not fiduciary. To charge me that 00:12:18.360 --> 00:12:21.559 amount and to load me up with a bunch of funds 00:12:21.559 --> 00:12:24.500 that were expensive did not have my best interests 00:12:24.500 --> 00:12:26.700 in mind. The fact that they even said they were 00:12:26.700 --> 00:12:28.919 a fiduciary, I don't think so. They get around 00:12:28.919 --> 00:12:31.840 it by saying, oh, well, it's in general, this 00:12:31.840 --> 00:12:33.580 is their best interest. Like they have their 00:12:33.580 --> 00:12:35.679 money in a retirement account. It's making money. 00:12:35.759 --> 00:12:37.480 So I'm helping them. And it's that's in their 00:12:37.480 --> 00:12:40.179 best interest. So I am a fiduciary, but they're 00:12:40.179 --> 00:12:41.820 not a fiduciary because if they were, they'd 00:12:41.820 --> 00:12:43.519 be like, why don't you just get a couple of Vanguard 00:12:43.519 --> 00:12:47.320 or Fidelity accounts? The expense ratio on the 00:12:47.320 --> 00:12:50.340 highest expense ratio on any of my accounts, 00:12:50.419 --> 00:12:56.669 I believe, is like point zero six. So not a lot. 00:12:57.029 --> 00:13:00.309 Not a lot at all. Like $0 .06 per every dollar 00:13:00.309 --> 00:13:04.409 I have in there. No, that's not true because 00:13:04.409 --> 00:13:08.250 that would be 6%. It's a crazy low amount. So 00:13:08.250 --> 00:13:10.289 the expense ratio is something you also have 00:13:10.289 --> 00:13:14.470 to look into if you have an account with one 00:13:14.470 --> 00:13:16.830 of these companies because what funds are they 00:13:16.830 --> 00:13:20.600 putting you in? Take a look. I hope this was 00:13:20.600 --> 00:13:23.399 helpful. I did a video recently on if you own 00:13:23.399 --> 00:13:25.960 your home and you're looking to retire, a great 00:13:25.960 --> 00:13:28.860 strategy for recapturing the interest on your 00:13:28.860 --> 00:13:31.120 mortgage and getting consistent monthly payments 00:13:31.120 --> 00:13:33.539 by being the bank on your home. I'm going to 00:13:33.539 --> 00:13:36.759 link it up here. And I hope this has been helpful. 00:13:36.919 --> 00:13:38.639 If you're a customer of any of these companies 00:13:38.639 --> 00:13:40.320 I've been talking about, or if you've had an 00:13:40.320 --> 00:13:42.320 experience with these companies that you'd like 00:13:42.320 --> 00:13:44.830 to share, I'd love to hear about. what you think 00:13:44.830 --> 00:13:47.149 about this, because I think it's really outrageous 00:13:47.149 --> 00:13:49.509 to charge these fees for people and take advantage 00:13:49.509 --> 00:13:53.669 of people's kind of disinterest or their just 00:13:53.669 --> 00:13:56.950 ignorance of investing, basically. And I mean 00:13:56.950 --> 00:13:58.549 that in the purest sense of the word, where you 00:13:58.549 --> 00:14:00.690 just don't know. And then these firms come in, 00:14:00.769 --> 00:14:02.940 make it seem scary and big. and charge you a 00:14:02.940 --> 00:14:05.100 bunch of fees. So if you have experience with 00:14:05.100 --> 00:14:06.679 these companies or you work for one of these 00:14:06.679 --> 00:14:09.100 companies, I'd love to hear from you too. I've 00:14:09.100 --> 00:14:11.399 been wrong before, but in my experience, I have 00:14:11.399 --> 00:14:14.399 not seen what the value is in having a retirement 00:14:14.399 --> 00:14:17.279 account with one of these companies and I don't 00:14:17.279 --> 00:14:19.600 recommend them. So hope this has been helpful. 00:14:19.779 --> 00:14:23.279 If it has, don't forget to hit the like, consider 00:14:23.279 --> 00:14:25.419 subscribing if you like, and I hope you have 00:14:25.419 --> 00:14:26.559 a wonderful day. Take care.